EMI: German industry accelerated its downturn in October
by David Fleschen
The seasonally adjusted S&P Global/BME Purchasing Managers' Index (EMI) fell further below the 50.0 growth threshold in October. The reading of 45.1, down from 47.8 in the previous month, was also the lowest since the first Corona wave in spring 2020, S&P Global reports.
The renewed drop in the EMI was mainly due to sharper declines in both manufacturing and new orders. The latter contracted at one of the most striking rates in the survey's history. Only during the global financial crisis and at the onset of the Corona pandemic were the declines more severe. Many respondents reported that high inflation, rising energy costs and increasing customer caution in the face of an uncertain outlook were the primary factors depressing demand, which in turn led many companies to curtail manufacturing.
"There is no end in sight to the negative trend. On the contrary. The final October EMI data confirm the downturn, which has been ongoing since July, as the German PMI, at 45.1, was also well below the 50-point reference line in the month under review," emphasised Dr Helena Melnikov, Chief Executive of the German Association of Materials Management, Purchasing and Logistics (BME), in Eschborn on Friday. Shrinking incoming orders and a further darkening business outlook were clear warning signs of an impending recession.
"In the third quarter, the German economy was still able to save itself into positive territory. However, all leading indicators - including the latest EMI - point to negative rates from now on," Dr. Gertrud R. Traud, chief economist at Helaba Landesbank Hessen-Thüringen, commented on the latest EMI data on Friday at the request of BME. "However, the current support packages should help to keep the minus within limits and a plus will be recorded again from the spring quarter onwards. Nevertheless, a decline of 0.6 per cent in German GDP is to be expected on average for the year 2023," the Helaba bank director added in her statement for the BME.
"German companies will be squeezed from several sides at once this winter. Purchasing managers are already assessing the demand situation as worse and worse and are talking about increasing stocks of finished goods because production can no longer be sold in full. At the same time, the cost burden is increasing due to high energy prices, rising interest rates and also growing wage pressure," Dr Ulrich Kater, chief economist at DekaBank, told BME on Friday.
Source: BME, Photo: Fotolia